Jan 12, 2009

Business - Raju confesses, says manipulation had been going for seven years

HYDERABAD: Satyam chairman B Ramalinga Raju has confessed to the Andhra Pradesh police that the unexpected downturn led to Maytas deal.

In his confession, Raju said the manipulation of accounts went on for seven years. The margin amounts were shown increased each year, he said.

"I did not bribe anybody," said the disgraced chairman. “I manipulated the accounts for more business," he added.

Sebi has also sought permission to record Raju's statement.

At present, Satyam has no cash reserves, despite the fact that the balance sheet prepared on March 31, 2008, shows a cash reserve of Rs 5,700 crore. To ensure smooth functioning of the company, a senior official said the company would require a new management, which could be trusted by clients and lenders, who have stopped giving Satyam money after the revelation of accounting fraud.

According to sources, interim CEO Ram Mynampati may be sacked. Government has criticized his role as a director, in its application to the Company Law Board (CLB), where it had sought permission to sack the earlier board.

Meanwhile, Satyam's three-member board constituted by the government on Sunday met for the first time on Monday to discuss ways to get the IT company back on track.

Eminent banker Deepak Parekh, IT expert Kiran Karnik and former SEBI member C Achuthan arrived at the Infocity campus of Satyam for the meeting, in which the chairman of the board is expected to be elected, PTI reported.

The board members are likely to meet mediapersons in the evening.

In its first meeting, the board is likely to elect Deepak Parekh as its chairman. It is learnt that the government has already sounded the members about Parekh as chairman. The other members will be appointed by the government with the consultation of the chairman and other appointed board members.

Parekh on Sunday said the first task of the board is to restore confidence in the clients and investors to continue business with Satyam.

While it's unlikely that the new board will continue with Mynampati as CEO, at the same time, it will have to ensure that the new CEO must be aware of the functioning of the Satyam, having over 500 clients.

Parekh will also discuss availability of working capital for the company as it is facing acute financial crunch. It immediately needs credit from banks to continue operation. Because of fraud fiasco, banks are not ready to lend the company against receivables as collateral, saying it is very difficult to believe on the company's statement as its balance sheet is under cloud.

Sources said that the board may decide to offer a seat to a bank, which will give it working capital. The board seat will give the bank inside information of its functioning and financial condition.

The board may also discuss appointment of remaining members. The government had sought permission from CLB to appoint 10 members, though it may not take the strength to 10. A senior official said the final number could be kept at five or seven.

The source added that as a first step, the government restricted itself to appointment of three members only, to avoid any clash of personality, which is crucial for smooth functioning of the board. So, government decided to select a core team first and later expand it. Some representation on the board could be given to institutional investors like Life Insurance Corporation.